Is US Aid Good or Bad For Pakistan?
This year's Nobel Prize winning economist Angus Deaton of Princeton University considers foreign aid to developing nations a curse like the oft-mentioned resource curse of energy and mineral-rich nations of Africa and the Middle East.
Deaton has studied poverty in India and Africa and spent many decades working at the World Bank whose charter it is to fight poverty. He argues that, by trying to help poor people in developing countries, the rich world may actually be corrupting those nations' governments and slowing their growth and hurting the poor in the process. Prof William Easterly of New York University has published a paper titled "Can Foreign Aid Buy Growth?" that supports the view that increase in foreign aid has reduced economic growth in Africa.
In addition to being recipients of foreign aid, most African countries are also rich in resources ranging from oil and gas to diamonds and metals. Yet, their people are among the poorest in the world. Why is it? The biggest reason appears to be their corrupt leaders who pocket most of the proceeds from mining. They also siphon off a big chuck of foreign aid left after paying the expensive western consultants employed by aid agencies.
So where does Pakistan stand in this mix? Charts published by Washington Post show that Pakistan, in spite of not being a major exporter of minerals, enjoyed an average economic growth rate of about 5% from 1970 to 2008. This is about the same as India's but higher than Brazil's and Turkey's GDP growth rates. The economic growth rates for China and Korea are much higher than Pakistan's in this period.
Foreign aid to Pakistan has also been more effective in promoting economic growth than much of Africa. Even Dambisa Moyo, author of "Dead Aid" and a critic of western aid, acknowledges that the US aid for "the Green Revolution in India (and Pakistan) played vital roles in economic (re)construction" of the South Asian nations in 1960s and 1970s. The South Asian subcontinent could have faced starvation without this aid.
One of the key reasons for the success of Green Revolution was the ability of the human capital in India and Pakistan to absorb the technological knowhow that it brought along with money. Ms. Moyo offers the same reason for the success of Marshall Plan aid in Europe.
US aid to Pakistan after the Green Revolution has been much smaller as percentage of the nation's GDP and much less effective. Total foreign aid to Pakistan has dramatically declined from a peak of over10% of GDP to less than 2% of GDP now, too little to impact economic growth even if it is utilized better.
The expected size and speed of the Chinese FDI of $46 billion in energy and infrastructure is much more likely to spur Pakistan's economic growth than the western aid has been in the recent past. It will put Pakistan on a path to rely much more on investment and trade than on aid or debt for its foreign exchange earnings.
Related Links:
Haq's Musings
Aid, Investment, Trade and Remittances for Pakistan
Declining Investment Hurting Pakistan's Economic Growth
Pak-China Industrial Corridor to Boost Investment and Trade
Pak Army Completes Over Half of CPEC Western Corridor
Pakistan Economic History 1947-2010
Top Global Fund Investor Bullish on Pakistan
Culture of Corruption in Pakistan
Deaton has studied poverty in India and Africa and spent many decades working at the World Bank whose charter it is to fight poverty. He argues that, by trying to help poor people in developing countries, the rich world may actually be corrupting those nations' governments and slowing their growth and hurting the poor in the process. Prof William Easterly of New York University has published a paper titled "Can Foreign Aid Buy Growth?" that supports the view that increase in foreign aid has reduced economic growth in Africa.
 |
| Source: William Easterly of NYU |
In addition to being recipients of foreign aid, most African countries are also rich in resources ranging from oil and gas to diamonds and metals. Yet, their people are among the poorest in the world. Why is it? The biggest reason appears to be their corrupt leaders who pocket most of the proceeds from mining. They also siphon off a big chuck of foreign aid left after paying the expensive western consultants employed by aid agencies.
So where does Pakistan stand in this mix? Charts published by Washington Post show that Pakistan, in spite of not being a major exporter of minerals, enjoyed an average economic growth rate of about 5% from 1970 to 2008. This is about the same as India's but higher than Brazil's and Turkey's GDP growth rates. The economic growth rates for China and Korea are much higher than Pakistan's in this period.
Foreign aid to Pakistan has also been more effective in promoting economic growth than much of Africa. Even Dambisa Moyo, author of "Dead Aid" and a critic of western aid, acknowledges that the US aid for "the Green Revolution in India (and Pakistan) played vital roles in economic (re)construction" of the South Asian nations in 1960s and 1970s. The South Asian subcontinent could have faced starvation without this aid.
One of the key reasons for the success of Green Revolution was the ability of the human capital in India and Pakistan to absorb the technological knowhow that it brought along with money. Ms. Moyo offers the same reason for the success of Marshall Plan aid in Europe.
 |
| Foreign Aid to Pakistan as Percent of GDP Source: World Bank |
US aid to Pakistan after the Green Revolution has been much smaller as percentage of the nation's GDP and much less effective. Total foreign aid to Pakistan has dramatically declined from a peak of over10% of GDP to less than 2% of GDP now, too little to impact economic growth even if it is utilized better.
The expected size and speed of the Chinese FDI of $46 billion in energy and infrastructure is much more likely to spur Pakistan's economic growth than the western aid has been in the recent past. It will put Pakistan on a path to rely much more on investment and trade than on aid or debt for its foreign exchange earnings.
Related Links:
Haq's Musings
Aid, Investment, Trade and Remittances for Pakistan
Declining Investment Hurting Pakistan's Economic Growth
Pak-China Industrial Corridor to Boost Investment and Trade
Pak Army Completes Over Half of CPEC Western Corridor
Pakistan Economic History 1947-2010
Top Global Fund Investor Bullish on Pakistan
Culture of Corruption in Pakistan
Comments
http://www.davisenterprise.com/local-news/ucd/ucd-pakistan-launch-17m-food-ag-partnership/ …
The launch of a $17 million collaborative project linking UC Davis and Pakistan’s leading agricultural university was celebrated today at UCD, which will receive $10 million of the funds.
The new U.S.-Pakistan Center for Advanced Studies in Agriculture and Food Security, funded by the U.S. Agency for International Development, will make it possible for faculty members and graduate students from both countries to study and do research at each other’s campuses. The project also is designed to update curriculum and technical resources at Pakistan’s University of Agriculture, Faisalabad.
Present for today’s ceremonial launch were dignitaries from Pakistan, USAID and UCD.
“UC Davis has been partnering with colleagues in Pakistan since 2009, sharing expertise in agriculture from crop production to post-harvest handling,” said James Hill, associate dean emeritus of International Programs for the College of Agricultural and Environmental Sciences at UCD.
“Establishment of this new center will allow us to build on those efforts, with a renewed emphasis on an exchange of faculty and graduate students,” he said.
During its first year of funding, the center will plan several workshops to assist the University of Agriculture, Faisalabad, with technology transfer and entrepreneurship to strengthen its connections to the private sector. UCD also will initiate programs in both research and curriculum development to improve graduate studies.
Hill noted that two other Pakistan-focused projects are already underway through the International Programs office, primarily in the area of horticultural crops and agricultural extension activities.
Agriculture is the largest sector of Pakistan’s economy, providing jobs for half of that country’s labor force. Some of the traditionally important crops in Pakistan are wheat, cotton, rice, sugar cane and maize. In recent years, crops like beans, peas, lentils, onions, potatoes, chilies and tomatoes also have increased in importance, along with fruit crops such as citrus and mangoes.
The newly funded center at UCD is the most recent of several partnerships of the U.S.-Pakistan Centers for Advanced Studies, a $127 million investment from USAID, linking universities in the two countries and using applied research to solve Pakistan’s challenges in energy, water and food security.
The overall program includes construction of laboratories, research facilities and libraries in Pakistan. Other participating U.S. universities include the University of Utah and Arizona State University, focusing on water and energy, respectively.
Deaton, however, believes that the poverty rates could be even higher. There is surely some omission in the surveys, which would mean that poverty is understated", Deaton told Hindustan Times in an interview.
He also said that the economic growth in India is not as high as the government presents it to be. India is said to be world's fastest-growing economy at 7 per cent growth rate.
"Everyone's data can be improved. I think it is widely recognized that the national accounts in India are relatively weak. So what I am most worried about is that growth is not as high as the accounts show. Revisions that increase growth are more readily accepted than revisions that reduce growth. So I am more worried about growth being overstated than poverty being understated," he added.
According to Deaton, the Indian government needs to invest more in nutrition, health and education of the young generation of the nation if it wants to overcome the growing poverty rate.
"Yes, though there are organizational and capacity problems that need to be overcome. In places where services don't work, for example, because of absenteeism, putting in more money is unlikely to help. But if other states can emulate the better services in the south, with more people demanding health and education, then we can make progress, and to do that, we will eventually need more money," he said.
Deaton, the Princeton University Professor, has done a thorough analysis of consumption and poverty in India. He contributed majorly to estimating India's poverty rate in 1990s with his work on India's malnutrition.
European Union will provide assistance of six hundred and fifty three million euros to Pakistan for rural development and reduction of poverty.
A memorandum of understanding for the EU’s Multi Indicative Programme (2014-2020) with a commitment of €653 million was signed between the government of Pakistan and European Union. The signing of the agreement was witnessed by Minister for Finance and Economic Affairs Senator Ishaq Dar and ambassadors and representatives from EU member states.
The minister on this occasion said that the government appreciates the development assistance being given to Pakistan by EU. He appreciated the fact that the new MIP was almost double the amount of the previous programme. He said that building a stable, democratic and economically vibrant Pakistan was the aim of the government.
He said that the government was committed to achieving this objective and called upon the EU and its member countries to support Pakistan in this regard.
EU Ambassador Jean-Francois Cautain said that the €653 million EU multiannual indicative programme for Pakistan set out the EU’s development strategic objectives in support of a stable and democratic Pakistan, in line with the EU-Pakistan five years engagement plan 2012-2017, which framed the relationship between the two sides.
He was speaking at the 65th anniversary of diplomatic relations between Japan-Pakistan. The event was organised by the English Speaking Union of Pakistan.
Kurai said that in the 90s Japan was the biggest donor of Pakistan. He said Japanese companies want a more stable environment in Pakistan for more investment. He said that the Prime Ministers of both countries had not visited each other’s countries for a long time. He hoped that these visits would take place in the near future. He said Japan supported Pakistan in healthcare, education, infrastructure development and other fields.
The envoy also said that both countries established diplomatic relations in 1952 and since then they have enjoyed excellent relations.
He said Japan is the only country that faced the horrors and destruction of the atomic bombs during WW2, but the Japanese showed resilience and patience and made the country’s economy stable.
Khalid Malik, president of the English Speaking Union of Pakistan and secretary general Muzafar Qureshi thanked the Japanese ambassador for attending the ceremony. They also praised his efforts for further boosting bilateral relations.
http://dailytimes.com.pk/pakistan/21-Jan-17/japan-is-pakistans-third-largest-donor
https://www.thenews.com.pk/print/740221-pakistan-us-cooperation-to-help-increase-energy-capacity
In partnership with the United States Government, the Managing Director of the National Transmission and Despatch Company (NTDC) inaugurated the Patrind Power Transmission Project Thursday.
This mutual investment from the United States and Pakistan will add 147 megawatts (MW) of hydroelectric capacity to Pakistan’s National Energy Grid.
The United States Government, through the US Agency for International Development (USAID), supported the effort by constructing transmission lines and upgrading grid stations in the Azad Kashmir/Khyber Pakhtunkhwa (KP) region. This effort will ultimately strengthen private sector investments in clean-energy projects. With this NTDC and USAID investment, Patrind is now selling electricity to the national grid and repaying its debt and equity obligations.
This achievement demonstrates that with strategic government support, the energy sector can be a driver of local and national economic growth. “The US Government is partnering with the Government of Pakistan to strengthen Pakistan’s energy sector and make it more competitive through the use of sustainable energy sources like hydroelectricity,” said USAID Mission Director Julie Koenen.
“Working with the Government of Pakistan, we have supported infrastructure projects, operational improvements, and policy reforms to help the energy sector function more efficiently and sustainably.
These efforts are helping Pakistan meet the needs of its growing population and economy.” Since 2010, USAID has partnered with the Government of Pakistan to add more than 3,600 MW to the national grid. These investments are benefitting more than 43 million Pakistanis, reducing costs for energy distribution companies by $429 million, and leveraging more than $2.3 billion in private investment.
USAID has also supported the construction of new transmission lines and substations to evacuate power from wind power projects to the national grid, as well as rehabilitated thermal and hydroelectric power plants. To ensure Pakistan’s future energy security, the U.S. Government will provide technical assistance to improve planning processes and operational procedures, introduce new technologies, and transition toward a competitive market structure with more participation by private sector companies.
https://www.thenews.com.pk/print/923951-overline-fiscal-years-2018-19-headline-us-single-largest-grant-contributor-to-pakistan
He said the US partners with six universities on American Spaces called "Lincoln Corners" in Punjab; several exchange programs take Pakistanis to the US who contribute to Pakistan's development with their newly acquired perspective and experience after joining Pakistan-US Alumni Network (PUAN); Pakistan hosts the world's largest Fulbright Program; the US has collaborated on a range of projects in agriculture, livestock, business development/entrepreneurship, education, health, governance, and energy sectors; vocational training has enabled entrepreneurship opportunities for 10,000 youths in four districts ofSouth Punjab; the US believes that all foreign assistance and investment to Pakistan should apply the highest international standards of openness, inclusivity, transparency, and governance; the US remains one of the largest providers of civilian assistance to Pakistan.
Following are the details of the interview: —
The News/Jang: What is the current scale of cultural cooperation with Punjab, including between governments, non-governmental organizations, and the private sector.?
US CG: Our Public Affairs Section at the Consulate implements a wide range of cultural and educational programs. We work on projects to conserve cultural heritage, sites such as the restoration of the Wazir Khan Mosque and surrounding areas, and we promote economic opportunities through our exchange programs and support for women entrepreneurs. We empower the youth through sports camps and English language training, and we partner with community colleges in Punjab to collaborate with American counterparts to strengthen higher education.
We partner with six universities on American Spaces in Punjab: Lahore, Faisalabad, Sargodha, Multan, and Vehari. At these American Spaces, called "Lincoln Corners," you can find information about the United States, English language learning opportunities, US 'study abroad' advice, cultural programs, and other activities. Visitors gain free access to Wi-Fi and current and reliable information about the US through books, magazines, videos, internet databases, and programs for the public. Visitors can also access cutting-edge technology like 3D printers, virtual reality headsets, and other Makerspace technology.
We collaborate on several exchange programs to bring Pakistanis to the United States. When the exchange program participants return home, we encourage them to join our Pakistan-US Alumni Network (PUAN), through which they can contribute to the development of Pakistan with their newly acquired perspective and experience. There are over 10,000 alumni across Punjab province - a larger network than in many countries around the world. PUAN selects its own leadership every year through a democratic process and acts as a liaison between the US Mission and the community. The US government contributes seed funding for the alumni to take on projects that benefit their communities.
Lastly, through EducationUSA, we provide free advising to prospective students in Pakistan seeking to study in the United States.